America Is Still the Best Place to Make Money
By Tom Dyson
Wednesday, April 22, 2009
There's never been a better time to be seeking fortune in America.
Right now, we're in a period of great turbulence. Everything in America is up for sale at "panic liquidation" prices. Each foreclosed property and bankruptcy headline you hear about represents another opportunity to make money.
One man goes bust and another man makes a fortune. It's the beauty of American capitalism. Assets never die; they just change owners. Take Kirk Kerkorian and Carl Icahn, for example.
Kirk Kerkorian is the majority owner of MGM Mirage, a gigantic casino and hotel company. In Las Vegas, it owns half the casinos on the Strip. MGM also owns huge casino resorts in Reno, Atlantic City, Detroit, Biloxi, and Macau.
In the boom times, like in 2005 and 2006, MGM's management borrowed too much money. Now Vegas is in a bust, and the company is having problems paying back what it owes. It has been furiously selling assets to raise cash... but it hasn't been enough.
Carl Icahn holds MGM's accumulating debt. As a debtholder, he'll be in control of MGM's assets if it declares bankruptcy. Once MGM's debt comes due, Icahn will simply foreclose MGM's remaining assets and seize its properties. Unless Kerkorian can borrow more money, Icahn may acquire the hotels, casinos, golf courses, and everything else MGM owns.
Right now, hundreds of companies like MGM are "up for sale." The financial crisis has pushed a big swirling cloud of valuable assets into the air like the dust in front of a leaf blower... and these assets can be grabbed up by anyone who wants them.
Last week, AbitibiBowater, the world's largest producer of newsprint, declared bankruptcy. Abitibi owns millions of acres of timberland, paper mills, and saw mills.
General Growth Properties (GGP) also filed for Chapter 11 last week. GGP owns 158 shopping centers around the country.
Timberland and shopping malls are valuable assets... especially with the authorities blasting cash into the economy like they are.
The Federal Reserve is injecting trillions into the economy. In just the last 25 days, it has added $56 billion from the printing machine. The federal government will inject another trillion dollars or more this year. There's so much cash coming out of the government, I can almost see it accumulating on the sidewalks. All we need to do is stoop down and pick it up.
The point is, America is the greatest country on Earth for building a fortune... and now it's as easy as ever, thanks to the financial crisis and the government's cash.
In my next column, I'll discuss some of the strategies I'm going to use to make a fortune in the next few years. Until then, start thinking about how you'll take your share of the money that's flying around...
Good investing,
Tom
Editor's note: Tom Dyson is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.
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THE STOCK MARKET NEEDS TO SHOW US THE MONEY
In mid-January, we placed the stock market on "volume watch."
Back then, the stock market was bouncing of its December lows. Many people were feeling bullish… They thought the worst was over for stocks. But our "volume watch" called for the market to show us healthy and rising trading volume in order to believe in the rally. Instead, the market went on to suffer a 20% decline.
We're in a similar situation this week. The market just staged a huge rally, as measured by the popular S&P 500 fund (SPY). But look at how trading volume has tailed off in the past few weeks. A truly healthy market has lots of "big money" buyers piling in to support prices. Those buyers are still on the sidelines.
We're not saying the market will fall 20% again. But we're still in the Jerry Maguire camp… meaning we need the stock market to "show us the money" in the form of healthy and rising volume during advances. Until we see this money, we're still skeptical.
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The New York Times Co. fell into a deeper financial hole during the first quarter as the newspaper publisher's advertising revenue plunged 27% in an industrywide slump.
The owner of The New York Times, The Boston Globe and 15 other daily newspapers said Tuesday that it lost $74.5 million, or 52 cents a share, in the opening three months of the year. That compared with a loss of $335,000 a year ago, which was break-even on a per-share basis.
– USA Today
Natural gas futures fell to their lowest in more than six years in New York on speculation demand will weaken for the factory and power-plant fuel.
Gas prices have declined 38 percent this year as companies including Caterpillar Inc., the world's largest maker of heavy equipment, cut jobs and shut plants. Caterpillar today reported its first quarterly net loss in 16 years and reduced its full-year profit and sales forecast because of the recession. Industrial users account for 29 percent of U.S. gas consumption.
"I don't see industrial demand recovering this year," said Stephen Schork, president of the Schork Group Inc., an energy markets consulting company, in Villanova, Pennsylvania. "We know how weak the fundamentals are for this market."
– Bloomberg
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